Question 1 (a) The production possibility frontier can be used to illustrate the tradeoffs and opportunity costs of different environmental policies. This question requires you to model the economic effects of these policies in the Australian context. i. Draw a production possibility frontier for Australia with automobiles on the Y-axis and all other goods and services on the X-axis (you do not need to include any numbers on your graph). Discuss how increasing awareness of climate change and action affect the choices made by the Australian economy. ii. Use this PPF to discuss how the introduction of a carbon tax would affect Australia. Clearly state your assumptions while making these conclusions. (b) Bob can make 10 burgers or 5 pizzas in an hour while Jane can make 30 burgers or 6 pizzas. i. Calculate each person's opportunity costs and determine which person has comparative advantage in the production of each item. Discuss whether there are any gains from trade. ii. Draw each person's PPF. Find a viable rate (terms of trade), if any, at which both Bob and Jane would be willing to specialise and engage in trade.

Question 1 (a) The production possibility frontier can be used to illustrate the tradeoffs and opportunity costs of different environmental policies. This question requires you to model the economic effects of these policies in the Australian context. i. Draw a production possibility frontier for Australia with automobiles on the Y-axis and all other goods and services on the X-axis (you do not need to include any numbers on your graph). Discuss how increasing awareness of climate change and action affect the choices made by the Australian economy. ii. Use this PPF to discuss how the introduction of a carbon tax would affect Australia. Clearly state your assumptions while making these conclusions. (b) Bob can make 10 burgers or 5 pizzas in an hour while Jane can make 30 burgers or 6 pizzas. i. Calculate each person's opportunity costs and determine which person has comparative advantage in the production of each item. Discuss whether there are any gains from trade. ii. Draw each person's PPF. Find a viable rate (terms of trade), if any, at which both Bob and Jane would be willing to specialise and engage in trade.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 4PA

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What does a production possibilities frontier illustrate?